95 bank accounts mainly belonging to Chinese students frozen in money laundering crackdown

In a major co-ordinated operation, police and law enforcement agencies froze 95 bank accounts belonging mainly to Chinese students in an attempt to tackle international money laundering.

What happened is of major significance beyond the Chinese and academic communities. This is because the operation saw the National Crime Agency (NCA), HM Revenue and Customs (HMRC) and various police forces target the students’ accounts using new powers; specifically account freezing orders (AFROs).

Under an AFRO, the authorities can freeze accounts while they investigate the source of the funds that are in them. In the case of the students, the accounts were frozen with a total of £3.6M in them.

The importance of this case is not the sums involved. The case shows the value to law enforcement agencies of AFROs. In a world where suspected offenders very often do not deal in cash, the AFRO gives the authorities the chance to target wealth linked to suspected criminality that is held in bank and building society accounts. It is likely that many more cases will begin in similar fashion – meaning many in business and many high net worth individuals may soon require legal representation in order to respond appropriately to being the target of an AFRO.

It was the Criminal Finances Act 2017 (CFA) that amended Part 5 of the Proceeds of Crime Act 2002 and introduced AFROs and account forfeiture orders (AFOOs) into UK law. Section 16 of the CFA inserted sections 303Z1 to 303Z19 into Part 5 of POCA 2002, creating powers to freeze the contents of bank and building society accounts so that, just as with cash, they could be forfeited in the same way – with a forfeiture order.   

Section 303Z1 of POCA allows an HMRC officer, police officer, Serious Fraud Office (SFO) officer or accredited financial investigator to apply to a Magistrates’ Court for an AFRO if he or she has reasonable grounds to suspect that monies held in an account are either the proceeds of crime or to be used in unlawful conduct.

The freezing of the account is the first stage of the process. The second stage is forfeiture.  This can involve an Account Forfeiture Notice being given by the police to the person affected, explaining that the money is set to be forfeited and specifying a time limit for any objection to that process.  If there is no objection then the AFOO application will be made to the Magistrates’ Court, with forfeiture being the result.

At the time, the amendment introducing AFROs and AFOOs was largely overshadowed by the CFA’s introduction of unexplained wealth orders; which were the subject of more headlines. But anyone who is the target of an AFRO is in a difficult position. Having an account frozen and being asked to explain its contents and the reason for each transaction going back months places a huge onus on the account holder.

As with unexplained wealth orders, an AFRO places the responsibility on the subject to prove that their wealth has not been obtained illegally, rather than the authorities having to prove that it is derived from crime. It could be argued that this is simply the law catching up with the modern world, where criminals are as likely to keep their assets in bank accounts as your or I.

But the AFRO process gives the authorities great power to act on any of the thousands of Suspicious Activity Reports generated each year by banks and building societies. We wrote last year that AFROs were likely to be attractive to the authorities and predicted that they would become a widely-used tool in the near future.

That time looks like it has arrived.

Aziz Rahman, of business crime solicitors Rahman Ravelli, explains why the legal problems encountered by more than 90 Chinese students may come to be experienced by senior business figures and high net worth individuals.